Atlas Lithium Corp

NOTE 1 –ORGANIZATION, BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Description of Business

Atlas Lithium Corporation (together with its subsidiaries “Atlas Lithium,” the “Company,” the “Registrant,” “we,” “us,” or “our”) was incorporated under the laws of the State of Nevada, on December 15, 2011. The Company changed its management and business on December 18, 2012, to focus on mineral exploration in Brazil.

Basis of Presentation and Principles of Consolidation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are expressed in United States dollars. For the period ended September 30, 2024, the consolidated financial statements include the accounts of the Company; its 100% owned subsidiaries Atlas Lítio Brasil Ltda. (“Atlas Brasil”), Athena Lítio Ltda (“Athena”) and Atlas Recursos Minerais (“Atlas Min”) and its 44.74% equity interest in Apollo Resources Corporation (“Apollo Resources”) and Apollo Resources’ subsidiaries, Mineração Apollo, Ltda., Mineração Duas Barras Ltda. (“MDB”) and RST Recursos Minerais Ltda. (“RST”); and the Company’s 21.01% equity interest in Jupiter Gold Corporation (“Jupiter Gold”), which includes the accounts of Jupiter Gold’s subsidiary, Mineração Jupiter Ltda. The Company has concluded that Apollo Resources, Jupiter Gold and their respective subsidiaries are variable interest entities (“VIE”) in accordance with applicable accounting standards and guidance. As such, the accounts and results of Apollo Resources, Jupiter Gold and their respective subsidiaries have been included in the Company’s consolidated financial statements.

All material intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results may differ from those estimates.

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.

Restatement of Previously Issued Financial Statements

As previously reported on Amendment No. 1 to our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2023, filed with the SEC on November 8, 2024 (the “Amended Annual Report”), we have restated our previously reported financial statements for the two fiscal years ending December 31, 2023 in connection with certain errors relating to the presentation, timing, omission and classification of certain items in the previously reported financial statements. In addition, as also reported on Amendment No. 1 to our Quarterly Report on Form 10-Q/A for the three months ended March 31, 2024, filed with the SEC on November 8, 2024 (the “Amended First Quarter Report”) and Amendment No. 1 to our Quarterly Report on Form 10-Q/A for the three and six months ended June 30, 2024, filed with the SEC on November 8, 2024, we restated the interim financial statements for such periods to correct, as applicable to such interim periods, the same errors restated in the Amended Annual Report relating to the presentation, timing, omission and classification of certain items therein. The Amended First Quarter Report was also restated to correct a clerical error in the calculation of weighted average shares outstanding during such period.

With respect to the restatements relating to the fiscal year ended December 31, 2023, all of the corrections to the consolidated statements of operations and comprehensive loss were recorded in the fourth quarter of such period. As a result, the presentation of the relevant comparative three and nine month periods ending September 30, 2023, respectively, indicates no changes from the previously reported numbers of those periods. In addition, because the restatements did not result in a change in the Company’s cash position and impacted only non-cash charges, the consolidated statements of cash flows for the prior periods which have been included in this report do not reflect any material changes from the previously reported consolidated statements of cash flows.

NOTE 2 –COMPOSITION OF CERTAIN FINANCIAL STATEMENT ITEMS

Property and Equipment

The following table sets forth the components of the Company’s property and equipment at September 30, 2024 and December 31, 2023:

Exploration costs such as drilling, development and related costs are either classified as exploration and charged to operations as incurred, or capitalized, such as to assist with mine planning within a reserve area. Whether to capitalize an exploration cost or incur an expense also depends on whether the drilling or development costs relate to an ore body that has been determined to be commercially mineable and whether the expenditure relates to a probable future benefit to be generated singly or in combination with other assets. The basis of the mineral interest is amortized on a units-of-production basis.

The Company previously reported it was acquiring five mineral rights totaling 1,090.88 hectares pursuant to a mineral rights purchase agreement entered into on January 19, 2023 (the “Acquisition Agreement”). After a period of preliminary assessment, the Company and the counterparty to the agreement agreed to revise the terms of the acquisition, following which the Company ultimately consummated the acquisition of only one mineral right totaling 45.77 hectares. The mineral right is located in the municipalities of Araçuaí and Itinga, in a region known as “Lithium Valley” in the state of Minas Gerais in Brazil. The Company’s obligations under the Acquisition Agreement as revised were:

Intangible Assets

Intangible assets consist of cost of software under development (implementation of SAP enterprise resource planning software). The carrying value of these intangible assets as of September 30, 2024 and at December 31, 2023 was $388,139 and $45,777, respectively.

Accounts Payable and Accrued Liabilities

Leases

Finance Leases

For the reporting period ended September 30, 2024, no financial leases meeting the criteria outlined in ASC 842 have been identified.

Operating Leases

Right of use (“ROU”) assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. When the rate implicit to the lease cannot be readily determined, we utilize our incremental borrowing rate in determining the present value of the future lease payments. The ROU asset includes any lease payments made and lease incentives received prior to the commencement date. Operating lease ROU assets also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term. The ROU assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The ROU and lease liabilities are primarily related to commercial offices with third parties.

The lease agreements have terms between 2 to 3 years and the liability was measured at the present value of the lease payments discounted using interest rates with a weighted average rate of 6.5%, which was determined to be the Company’s incremental borrowing rate. The continuity of the lease liabilities is presented in the table below:

The maturity of the lease liabilities (contractual undiscounted cash flows) is presented in the table below:

Convertible Debt

On November 7, 2023, the Company entered into a convertible note purchase agreement (the “Convertible Note”) with Mr. Martin Rowley (“Mr. Rowley”) and other investors to raise up to $20,000,000 in proceeds through the issuance of convertible promissory notes with the following key terms:

On November 7, 2023, the Company issued $10,000,024 in convertible promissory notes under the terms of the Convertible Note Purchase Agreement, and through September 30, 2024 there were no other purchases and sales of the convertible promissory notes pursuant to the Convertible Note Purchase Agreement.

In the three and nine months ended September 30, 2024, the Company recorded the following in the consolidated statement of operations and comprehensive loss: (i) $163,800 and $487,881 in interest expense ($nil and $nil, for the three and nine months ended September 30, 2023) and (ii) $26,188 and $77,995 in accretion expense ($niland $nil, for the three and nine months ended September 30, 2023).

Derivative Liabilities

a) Derivative liability – embedded conversion feature on convertible debt

On November 7, 2023, the Company issued convertible promissory notes to Mr. Rowley (a senior adviser to the Company and the father of Nicholas Rowley, at that time the Company’s Vice President of Business Development), and other investors. In accordance with FASB ASC 815, the conversion feature of the convertible debt was determined to be an embedded derivative. As such, it was bifurcated from the host debt liability and was recognized as a derivative liability in the consolidated balance sheets. The derivative liability is measured at fair value through profit or loss.

At December 31, 2023, the fair value of the embedded conversion feature was determined to be $486,304 using a Black-Scholes collar option pricing model with the following assumptions:

At September 30, 2024, the fair value of the embedded conversion feature was determined to be $89,652 using a Black-Scholes collar option pricing model with the following assumptions:

In the Black-Scholes collar option pricing models, the expected volatilities were based on historical volatilities of the securities of the Company and its trading peers, and the risk-free interest rates were determined based on the prevailing rates at the grant date for U.S. Treasury Bonds with a term equal to the expected term of the instrument being valued.

In the three and nine months ended September 30, 2024, the Company recognized a $84,934 gain and $396,651 gain, respectively, on changes in fair value of financial instruments in the consolidated statement of operations and comprehensive loss ($nil and $nil, in the three and nine months ended September 30, 2023).

b) Derivative liability – other stock incentives

The employment agreement of a Vice President of the Company, dated September 30, 2023, provides for the issuance of shares of the Company’s common stock based on us achieving certain market capitalization milestones. As of September 30, 2024, the Company’s obligations under this employment agreement contemplates the issuance of additional shares of the Company’s common stock in five tranches, each representing 0.2% of the Company’s common stock outstanding at the time of vesting, with an expiry date of December 31, 2026 and market vesting conditions as follows:

In accordance with FASB ASC 815, these RSU awards were classified as a liability, measured at fair value through profit or loss, and compensation expense is recognized over the expected term.

As at September 30, 2024, Tranche 3, Tranche 4, Tranche 5, Tranche 6 and Tranche 7 remain outstanding and unvested, and the total fair value of these outstanding rights to receive restricted stock was $556,898, as measured using a Monte Carlo Simulation with the following ranges of assumptions: the Company’s stock price on the September 30, 2024 measurement date, expected dividend yield of 0%, expected volatility between 71.2% and 82.3%, risk-free interest rate between a range of 5.09% to 5.48%, and an expected term of 2.5 years. The expected volatilities were based on historical volatilities of the securities of the Company and its trading peers, and the risk-free interest rates were determined based on the prevailing rates at the grant date for U.S. Treasury Bonds with a term equal to the expected term of the award being valued.

As at December 31, 2023, Tranche 3, Tranche 4, Tranche 5, Tranche 6 and Tranche 7 remain outstanding and unvested, and the total fair value of these outstanding rights to received restricted stock was $1,550,576, as measured using a Monte Carlo Simulation with the following ranges of assumptions: the Company’s stock price on the December 31, 2023 measurement date, expected dividend yield of 0%, expected volatility between 72.3% and 89.3%, risk-free interest rate between a range of 4.79% to 5.41%, and an expected term between 3 months and 12 months. The expected volatilities were based on historical volatilities of the securities of the Company and its trading peers, and the risk-free interest rates were determined based on the prevailing rates at the grant date for U.S. Treasury Bonds with a term equal to the expected term of the award being valued.

NOTE 3 –DEFERRED OTHER INCOME

On May 2, 2023, the Company and Atlas Litio Brasil Ltda. (the “Company Subsidiary”), entered into a Royalty Purchase Agreement (the “Purchase Agreement”) with Lithium Royalty Corp., a Canadian company listed on the Toronto Stock Exchange (“LRC”). The transaction contemplated under the Purchase Agreement closed simultaneously on May 2, 2023, whereby the Company Subsidiary sold to LRC in consideration for $20,000,000 in cash, a royalty interest equaling 3% of the gross revenue (the “Royalty”) to be received by the Company Subsidiary from the sale of products from certain 19 mineral rights and properties that are located in Brazil and held by the Company Subsidiary.

On the same day, the Company Subsidiary and LRC entered into a Gross Revenue Royalty Agreement (the “Royalty Agreement”) pursuant to which the Company Subsidiary granted LRC the Royalty and undertook to calculate and make royalty payments on a quarterly basis commencing from the first receipt of the sales proceeds with respect to the products from the Property. The Royalty Agreement contains other customary terms, including but not limited to, the scope of the gross revenue, the Company Subsidiary’s right to determine operations, and LRC’s information and audit rights. Under the Royalty Agreement, the Company Subsidiary also granted LRC an option to purchase additional royalty interests with respect to certain additional Brazilian mineral rights and properties on the same terms and conditions as the Royalty, at a total purchase price of $5,000,000.

NOTE 4 –OTHER NONCURRENT LIABILITIES

Other noncurrent liabilities are comprised solely of tax refinancing programs at our operating subsidiaries located in Brazil. The balance of these tax liabilities as of September 30, 2024, and December 31, 2023, amounted to $21,680 and $58,579, respectively.

NOTE 5 –STOCKHOLDERS’ EQUITY

Authorized Stock and Amendments

On July 18, 2022, the board of directors of the Company (the “Board of Directors” or “Board”) approved a reverse stock split of the Company’s issued and outstanding shares of common stock at a ratio of 1-for-750 without affecting the number of shares of authorized common stock (the “Originally Intended Reverse Stock Split”). The holder of the majority voting power of our voting stock (the “Majority Stockholder”) approved the Originally Intended Reverse Stock Split by written consent on July 18, 2022, in lieu of a meeting of stockholders as permitted under the Nevada Revised Statute (“NRS”) Section 78.320(2) and the company’s bylaws, as then amended (the “Bylaws”).

On December 20, 2022, the Company made the appropriate filings with the Secretary of State of the State of Nevada (“SOS”) that were intended to effect the Originally Intended Reverse Stock Split (the “Original Articles Amendment”). In April 2023, the Board determined that due to an error, the Original Articles Amendment was a nullity and that it would be in the best interest of the Company to take corrective action to remedy the inaccuracy and to file the documents that would have been necessary to effectuate a 1-for-750 reverse stock split of the issued and outstanding common stock with a corresponding split of the authorized common stock (the “Rectified Reverse Stock Split”) and then immediately thereafter increase the number of shares of authorized common stock back to the number it was prior to the Rectified Reverse Stock Split as of December 20, 2022.

On April 21, 2023, the Board authorized and approved the necessary documents and filings with the SOS to decrease the number of the Company’s issued and outstanding shares of common stock and correspondingly decrease the number of authorized shares of common stock, each at a ratio of 1-for-750, retroactively effective as of December 20, 2022, without a vote of the stockholders, as pursuant to the NRS, no stockholder approval was required. Also on April 21, 2023, the Board and the Majority Stockholder approved an Authorized Capital Increase Amendment to increase the authorized number of shares of common stock from 5,333,334 shares to 4,000,000,000 shares retroactively as of December 20, 2022, in accordance with the Board’s and stockholders’ original intent in effecting the Originally Intended Reverse Stock Split.

Further, the Board determined that it was advisable and in the best interests of the Company to amend and restate the Company’s articles of incorporation to decrease the number of shares of authorized common stock to two hundred million (200,000,000) and to amend certain other provisions in the Company’s articles (the “Amended and Restated Articles”). The Board and the Majority Stockholder determined to decrease the number of shares of authorized common stock to reduce the number of shares available for issuance given the negative perception the dilutive effect of having such a large number of shares available for issuance may have on any potential future efforts to attract additional financing. On April 21, 2023, the Board and the Majority Stockholder approved the Amended and Restated Articles. On May 25, 2023, the Company made the appropriate filings with the SOS to effect the changes as described above.

On May 25, 2023, the Company also filed with the SOS a Certificate of Withdrawal of Designation of the Series B Convertible Preferred Stock and a Certificate of Withdrawal of Designation of the Series C Convertible Preferred which were effective as of May 25, 2023.

As of December 31, 2023 and September 30, 2024, the Company had 200,000,000 authorized shares of common stock, with a par value of $0.001 per share.

Series A Preferred Stock

On December 18, 2012, the Company filed with the SOS a Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock (“Series A Stock”) to designate one share of a new series of preferred stock. The Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock provides that for so long as Series A Stock is issued and outstanding, the holders of Series A Stock shall vote together as a single class with the holders of the Company’s common stock, with the holders of Series A Stock being entitled to 51% of the total votes on all such matters regardless of the actual number of shares of Series A Stock then outstanding, and the holders of common stock are entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power. The one outstanding share of our Series A Stock has been held by our Chief Executive Officer and Chairman, Mr. Marc Fogassa since December 18, 2012, a period greater than 11 years.

Series D Preferred Stock

On September 16, 2021, the Company filed with the SOS a Certificate of Designations, Preferences and Rights of Series D Convertible Preferred Stock (“Series D Stock”) to designate 1,000,000 shares of a new series of preferred stock. The Certificate of Designations, Preferences and Rights of Series D Convertible Preferred Stock (the “Series D COD”) provides that for so long as Series D Stock is issued and outstanding, the holders of Series D Stock shall have no voting power until such time as the Series D Stock is converted into shares of common stock. Pursuant to the Series D COD one share of Series D Stock is convertible into 10,000 shares of common stock and may be converted at any time at the election of the holder. Giving effect to the Reverse Stock Split discussed above, each share of Series D Stock is effectively convertible into 13 and 1/3 shares of common stock. Holders of the Series D Stock are not entitled to any liquidation preference over the holders of common stock and are entitled to any dividends or distributions declared by the Company on a pro rata basis. There were no shares of Series D Stock outstanding as of September 30, 2024 or December 31, 2023.

Nine Months Ended September 30, 2023 Transactions

On January 9, 2023, the Company, entered into an underwriting agreement (the “Underwriting Agreement”) with EF Hutton, division of Benchmark Investments, LLC, as representative of the underwriters named therein (the “Representative”), pursuant to which the Company agreed to sell an aggregate of 675,000 shares of the Company’s common stock, to the Representative, at a public offering price of $6.00 per share (the “Offering Price”) in a firm commitment public offering (the “Offering”). The Company also granted the Representative a 45-day option to purchase up to 101,250 additional shares of the Company’s common stock upon the same terms and conditions for the purpose of covering any over-allotments in connection with the Offering (the “Over-Allotment Option”). On January 11, 2023, the Representative delivered its notice to exercise the Over-Allotment Option in full.

The shares of common stock were offered by the Company pursuant to a registration statement on Form S-1, as amended (File No. 333-262399) filed with the SEC and declared effective on January 9, 2023 (the “Registration Statement”). The consummation of the Offering took place on January 12, 2023 (the “Closing”).

In connection with the Closing, the Company issued to the Representative, and/or its permitted designees, as a portion of the underwriting compensation payable to the Representative, warrants to purchase an aggregate of 33,750 shares of common stock, equal to 5% of the number of shares of common stock sold in the Offering (excluding the Over-Allotment Option), at an exercise price of $7.50, equal to 125% of the Offering Price (the “Representative’s Warrants”). The Representative’s Warrants are exercisable for a period of five years from the effective date of the Registration Statement, provided that they are subject to a mandatory lock-up for 180 days from the commencement of sales of the Offering in accordance with FINRA Rule 5110(e). Aggregate gross proceeds from the Offering were $4,657,500.

NOTE 5 –STOCKHOLDERS’ EQUITY (CONTINUED)

On January 30, 2023, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with two investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors in a Regulation S private placement (the “Private Placement”) an aggregate of 640,000 restricted shares of the Company’s common stock (the “Shares”). The purchase price for the Shares was $6.25 per share, for total gross proceeds of $4,000,000. The Private Placement transaction closed on February 1, 2023.

Additionally, during the nine months ended September 30, 2023, the Company sold an aggregate of 192,817 shares of our common stock to Triton Funds, LP for total gross proceeds of $1,675,797 pursuant to a Common Stock Purchase Agreement (the “CSPA”) entered into between the Company and Triton Funds, LP, dated February 26, 2021. For a description of the transactions contemplated under the CSPA, please refer to our Form 8-K filed with the SEC on March 2, 2021.

On May 26, 2023, our CEO and Chairman, Mr. Marc Fogassa, elected to convert 214,006 shares of Series D Stock, representing all of his outstanding shares of Series D Stock at that time, into shares of common stock. As a result, of such conversion, the Company issued Mr. Fogassa 2,853,413 new shares of common stock.

On July 18, 2023, the Company consummated a transaction with four investors, pursuant to which the Company agreed to issue and sell to the Investors in a Regulation S private placement an aggregate of 526,317 restricted shares of the Company’s common stock, par value $0.001 per share. The purchase price for the Shares was $19.00 per share, for total gross proceeds of $10,000,023.

Nine Months Ended September 30, 2024 Transactions

During the nine months ended September 30, 2024, the Company issued 2,494,211 new shares of Common Stock, including (i)1,871,250 shares issued to an accredited investor for gross proceeds of $30,000,000 pursuant to a March 28, 2024 subscription agreement with Mitsui & Co., Ltd. (“Mitsui”), and (ii)622,961 shares issued to consultants, officers and directors upon vesting of restricted stock units.

Common Stock Options

During the nine months ended September 30, 2024 and 2023, the Company granted options to purchase common stock to officers, consultants and non-management directors. The options were valued using the Black-Scholes option pricing model with the following ranges of assumptions:

Changes in common stock options for the nine months ended September 30, 2024 and 2023 were as follows:

During three and nine months ended September 30, 2024, the Company recorded $3,389,507 and $10,094,837 in stock-based compensation expense from common stock options in the consolidated statements of operations and comprehensive loss ($nil and $446,726, during the three and nine months ended September 30, 2023).

Series D Preferred Stock Options

As of and for the nine months ended September 30, 2024, the Company had no Series D preferred stock options outstanding and no shares of Series D Stock outstanding. During the nine months ended September 30, 2023, the Company granted options to purchase series D stock to two of the Company’s directors. All Series D preferred stock options vested immediately at the grant date and were exercisable for a period of ten years from the date of issuance. The options were valued using the Black-Scholes option pricing model with the following ranges of assumptions:

Changes in Series D preferred stock options for the nine months ended September 30, 2023 were as follows:

During the three and nine months ended September 30, 2024, the Company recorded $nil and $nil, respectively, in stock-based compensation expense from Series D preferred stock options in the consolidated statements of operations and comprehensive loss ($732,309 and $1,735,792, respectively, during the three and nine months ended September 30, 2023).

Common Stock Purchase Warrants

Common stock purchase warrants are accounted for as equity in accordance with ASC 480,Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity.

During the nine months ended September 30, 2024, the Company did not issue any common stock purchase warrants. During the nine months ended September 30, 2023, the Company issued common stock purchase warrants to investors, finders and brokers in connection with the Company’s equity financings. All warrants vest within 180 days from issuance and are exercisable for a period of one to five years from the date of issuance. The common stock purchase warrants were valued using the Black-Scholes option pricing model with the following ranges of assumptions:

Changes in common stock purchase warrants for the nine months ended September 30, 2024 and September 30, 2023 were as follows:

During the three and nine months ended September 30, 2024, the Company recorded the following as a result of the common stock purchase warrant activity: (i) $nil and $nil, respectively, in stock-based compensation expense in the consolidated statements of operations and comprehensive loss ($1,961,661 and $1,961,661, respectively, during the three and nine months ended September 30, 2023), and (ii) $nil and $nil, respectively, in share issuance costs in the consolidated statement of changes in equity ($48,607 and $196,455, respectively, during the three and nine months ended September 30, 2023).

Restricted Stock Units (“RSUs”)*

Restricted stock units (“RSUs”) are granted by the Company to its officers, consultants and directors of the Company as a form of stock-based compensation. The RSUs are granted with varying immediate-vesting, time-vesting, performance-vesting, and market-vesting conditions as tailored to each recipient. Each RSU represents the right to receive one share of the Company’s common stock immediately upon vesting.

Changes in RSUs for the nine months ended September 30, 2024 and September 30, 2023 were as follows:

During the three and nine months ended September 30, 2024, the Company recorded $1,609,665 and $6,728,827 in stock-based compensation expense from the Company’s RSU activity in the period ($688,953 and $1,237,507, respectively, during the three and nine months ended September 30, 2023). As of September 30, 2024, there were 444,000 RSUs outstanding including rights to receive 10,000 shares of common stock as a result of RSU vesting (December 31, 2023:924,364 RSUs outstanding including rights to receive 115,653 shares of common stock as a result of RSU vesting).

Other stock incentives measured at fair value through profit or loss

As of September 30, 2024, the Company had certain other outstanding obligations to issue shares of the Company’s common stock in case some markets conditions are met pursuant to an officer’s employment agreement, as further disclosed in the ‘Derivative liabilities’ section above. These were designated as liability-classified awards and are measured at fair value through profit or loss. As of September 30, 2024, the Company recognized a $89,652 derivative liability and would have been obligated to issue 152,580 shares of common stock pursuant to these other stock incentives had the conditions of such stock incentives been met (December 31, 2023: recognized a $513,757 derivative liability relating to 127,535 shares of common stock that the Company would have been obligated to issue had the conditions of the stock incentives been met).

NOTE 6 –COMMITMENTS AND CONTINGENCIES

Commitments

The following table summarizes certain of Atlas’s contractual obligations at September 30, 2024 (in thousands):

Please see commitments related to Leases in Note 2.

NOTE 7 –RELATED PARTY TRANSACTIONS

Related party transactions are recorded at the exchange amount transacted as agreed between the Company and the related party. All the related party transactions have been reviewed and approved by the Board.

The Company’s related parties include:

Technical Services Agreement

In July 2023, the Company entered into a technical service agreement (“Technical Services Agreement”) with RTEK pursuant to which RTEK agreed to provide the Company certain mining engineering, planning and business development services. Messrs. Nick Rowley and Brian Talbot are the founders and principals of RTEK. On March 31, 2024, the Technical Services Agreement was amended and restated (the “Amended and Restated RTEK Agreement”) to reflect that part of the compensation originally scheduled to be paid to RTEK was allocated as compensation for Mr. Talbot in connection with his appointment as the Company’s director and Chief Operating Officer. Under the terms of the Amended and Restated RTEK Agreement, the Company will issue RTEK RSUs for (i) 75,000 (seventy-five thousand) fully paid shares of the Company’s stock vesting on the successful completion of certain performance criteria outlined in the Amended and Restated R-TEK Agreement; RSUs for 100,000 (one hundred thousand) fully paid shares of the Company’s common stock vesting upon completion of other identified performance criteria; and RSUs for 100,000 (one hundred thousand) fully paid shares of the Company’s common stock vesting upon on the delivery of a working plant as defined in the Amended and Restated RTEK Agreement. Any unvested RSUs shall immediately vest in the event of a Change in Control (as defined in the Company’s 2023 Equity Incentive Plan).

NOTE 7 – RELATED PARTY TRANSACTIONS (CONTINUED)

Convertible Note Purchase Agreement

In November 2023, the Company entered into a Convertible Note Purchase Agreement with Mr. Rowley relating to the issuance to Mr. Rowley along with other experienced lithium investors, of convertible promissory notes with an aggregate total principal amount of $10.0 million, accruing interest at a rate of 6.5% per annum. Pursuant to the Convertible Note Purchase Agreement, Mr. Rowley, through Jaeger, purchased an aggregate of $1,967,503.0 of the Notes. The Notes will mature in November 2026.

Offtake and Sales Agreements

In December 2023, the Company entered into Offtake and Sales Agreements with each of Sichuan Yahua Industrial Group Co., Ltd. and Sheng Wei Zhi Yuan International Limited, a subsidiary of Shenzhen Chengxin Lithium Group Co., Ltd., pursuant to which the Company agreed, for a period of five (5) years, to sell to each buyer 60,000 dry metric tonnes of lithium concentrate (the “Product”) per year, subject to the Company’s authority to increase or decrease such quantity by up to ten percent (10%) each year. Each of the buyers agreed to pre-pay to the Company $20.0 million (each, a “Pre-Payment Amount”) for future deliveries of the Product after the Company obtains customary licenses. Each Pre-Payment Amount will be used to offset against such buyer’s future payment obligations for the Product.

On March 28, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Mitsui through which it sold and issued an aggregate of 1,871,250 shares of its Common Stock in a registered direct offering (the “Registered Offering”) at a purchase price of $16.0321 per share. The Purchase Agreement contains customary representations and warranties, covenants and indemnification rights and obligations of the Company and the Investor. The closing occurred on April 4, 2024.

The gross proceeds from the Registered Offering were $30.0 million before deducting related offering expenses. The Company intends to use the net proceeds from the Registered Offering primarily for general corporate purposes, including the development and commercialization of its products, general and administrative expenses, and working capital and capital expenditures.

In connection with the closing of the Registered Offering, our subsidiary Atlas Brasil and the Investor entered into an Offtake and Sales Agreement, pursuant to which Atlas Brazil agreed to sell and deliver to the Investor, and the Investor agreed to purchase and take delivery of,(i) the spot quantity of fifteen thousand (15,000) dry metric tons of Atlas Brazil’s product, and, subject to the fulfillment of certain conditions precedent, (ii) up to sixty thousand (60,000) dry metric tons of Atlas Brazil’s product for each year, up to a total of three hundred thousand (300,000) dry metric tons.

The related parties outstanding amounts and expenses as of September 30, 2024 and December 31, 2023 are shown below:

In the course of preparing consolidated financial statements, we eliminate the effects of various transactions conducted between Atlas and its subsidiaries and among the subsidiaries.

Jupiter Gold Corporation

During the nine months ended September 30, 2024, Jupiter Gold was party to the following stock-based compensation transactions with related parties of the Company:

i. Jupiter Gold granted options to purchase an aggregate of 210,000 shares of its common stock to Marc Fogassa at prices ranging between $0.01 to $1.00 per share. The options were valued at $42,000 and recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with the following average assumptions: Jupiter Gold’s stock price on the date of the grant ($0.74 to $1.00), an illiquidity discount of 75%, expected dividend yield of 0%, historical volatility calculated between 241% and 312%, risk-free interest rate between a range of 3.88% to 4.64%, and an expected term between 5 and 10 years.

ii. Marc Fogassa exercised a total 1,350,000 options at a $0.01 weighted average exercise price. These exercises were paid for with $13,500 in cash. As a result of the options exercised, the Company issued 1,350,000 shares ofcommon stock to Marc Fogassa.

iii. Jupiter Gold issued 256,128 shares of common stock of Jupiter Gold to officers of the Company at a weighted average price of $0.88 per share in settlement of $226,500 in salaries and fees owed.

iv. On July 1, 2024, Jupiter Gold issued 475,776 shares of common stock of Jupiter Gold to Marc Fogassa at a price of $0.909 per share as incentive compensation in accordance with an amended and restated employment agreement between Marc Fogassa and Jupiter Gold, effective July 1, 2024.

NOTE 7 – RELATED PARTY TRANSACTIONS (CONTINUED)

As of September 30, 2024, an aggregate 70,000 Jupiter Gold common stock options were outstanding with a weighted average life of 4.13 years at a weighted average exercise price of $1.00 and an aggregate intrinsic value of $nil.

During the nine months ended September 30, 2023, Jupiter Gold granted options to purchase an aggregate of 315,000 shares of its common stock to Marc Fogassa at prices ranging between $0.01 to $1.00 per share. The options were valued at $96,097 and recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with the following average assumptions: the Jupiter Gold’s stock price on the date of the grant which ranged from $0.85 to $2.10, an illiquidity discount of 75%, expected dividend yield of 0%, historical volatility calculated ranging from 298% to 371%, risk-free interest rate between a range of 3.42% to 4.19%, and an expected term between five andten years. During the nine months ended September 30, 2023, Marc Fogassa exercised a total 1,115,000 options at a $0.98 weighted average exercise price. These exercises were paid for with 386,420 options conceded in cashless exercises. As a result of the options exercised, Jupiter Gold issued 728,580 shares of Jupiter Gold’s common stock to Marc Fogassa. As of September 30, 2023, an aggregate 1,105,000 Jupiter Gold common stock options were outstanding with a weighted average life of 8.38 years at a weighted average exercise price of $0.0324 and an aggregated intrinsic value of $1,015,200.

On June 13, 2023, the Company purchased 320,700 shares of Jupiter Gold common stock at $1.00 per share.

Apollo Resource Corporation

During the nine months ended September 30, 2024, Apollo Resources was party to the following stock-based compensation transactions with related parties of the Company:

i. Apollo Resources granted options to purchase an aggregate of 90,000 shares of its common stock to Marc Fogassa at a price of $0.01 per share. The options were valued at $134,408 and recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with the following average assumptions: Apollo Resources’ stock price on the date of the grant ($6.00), an illiquidity discount of 75%, expected dividend yield of 0%, historical volatility calculated between 16.61% and 17.41%, risk-free interest rate between a range of 3.88% to 4.64%, and an expected term of 10 years.

ii. Marc Fogassa exercised a total 495,000 options at a $0.01 weighted average exercise price. These exercises were paid for with $4,950 in cash. As a result of the options exercised, Apollo Resources issued 495,000 common shares to Marc Fogassa.

iii. Apollo Resources issued 68,741 shares of common stock of Apollo Resources to officers of the Company at a weighted average price of $4.44 share in settlement of $305,246 in salaries and fees owed.

iv. On July 1, 2024, Apollo Resources issued 104,741 shares of common stock of Apollo Resources to Marc Fogassa at a price of $4.41 per share as incentive compensation according to an amended and restated employment agreement between Marc Fogassa and Apollo Resources, effective July 1, 2024.

As of September 30, 2024, no Apollo Resources common stock options were outstanding.

During the nine months ended September 30, 2023, Apollo Resources granted options to purchase an aggregate of 135,000 shares of its common stock to Marc Fogassa at a price of $0.01 per share. The options were valued at $167,822 and recorded to stock-based compensation. The options were valued using the Black-Scholes option pricing model with the following average assumptions: Apollo Resources’ stock price on the date of the grant, which was $5.00, an illiquidity discount of 75%, expected dividend yield of 0%, historical volatility calculated ranging from 44.0% to 58.0%, risk-free interest rate between a range of 3.42% to 4.19%, and an expected term often years. As of September 30, 2023, an aggregate of 360,000 Apollo Resources common stock options were outstanding with a weighted average life of 8.96 years at a weighted average exercise price of $0.01 and an aggregate intrinsic value of $1,796,400.

NOTE 8 –RISKS AND UNCERTAINTIES

Currency Risk

The Company operates primarily in Brazil which exposes it to currency risks. The Company’s business activities may generate intercompany receivables or payables that are in a currency other than the functional currency of the Company. Changes in exchange rates from the time the activity occurs to the time payments are made may result in the Company receiving either more or less in local currency than the local currency equivalent at the time of the original activity.

The Company’s consolidated financial statements are denominated in U.S. dollars. Accordingly, changes in exchange rates between the applicable foreign currency and the U.S. dollar affect the translation of each foreign subsidiary’s financial results into U.S. dollars for purposes of reporting in the consolidated financial statements. The Company’s foreign subsidiaries translate their financial results from the local currency into U.S. dollars in the following manner: (a) income statement accounts are translated at average exchange rates for the period; (b) balance sheet asset and liability accounts are translated at end of period exchange rates; and (c) equity accounts are translated at historical exchange rates. Translation in this manner affects the shareholders’ equity account referred to as the foreign currency translation adjustment account. This account exists only in the foreign subsidiaries’ U.S. dollar balance sheets and is necessary to keep the foreign subsidiaries’ balance sheets in agreement.

NOTE 9 –SUBSEQUENT EVENTS

Neves Project Permission

On October 28, 2024, we received the operational permit for our Neves Project from the government of the state of Minas Gerais in Brazil. This triphasic permit (known as “LI/LP/LO” in the local regulatory terminology) is the most expeditious licensing modality available as it encompasses the initial, installation, and operating licenses all within this same issued authorization. The permit authorizes us to assemble and operate our lithium processing plant, to process mined ore from one of our deposits at the facility, and to sell the lithium concentrate that we produce. The permit was unanimously approved by a voting board comprised of twelve representatives from the local civil society and government on October 25, 2024, and formally published in the official gazette of the Minas Gerais government on October 26, 2024. This outcome followed the technical recommendation for approval issued by the Environmental Foundation of Minas Gerais in September 2024. This key development came after an extensive technical review process that began with our initial permit application on September 1, 2023.